Recently, DeFi, or decentralized finance, has made a breakthrough. As seen in a previous article, the scope of Bitcoin can be compared to monetary aggregates. However, in this comparison, we have not mentioned DeFi.
What about DeFi?
DeFi is a set of financial services, which use blockchain technology to achieve its goals. Most of the DeFi projects are based on the Ethereum blockchain, which explains the strong rise of the token. Since a few months, the Binance Smart Chain blockchain, which is a blockchain powered by the Binance crypto-currency exchange platform, also proposes many DeFi projects.
Thus, the DeFi makes it possible, among other things, to lend or borrow, either directly to other people or indirectly.
In the DeFi, it is notably possible to lend both Bitcoins and Dollars, or both Bitcoins and Euros, in exchange for a reward in the form of an interest rate. This loan allows the marketplace to have sufficient liquidity to operate; when a person lends his Bitcoins and Euros, he "stakes" his Bitcoins in exchange for a reward, which comes from the commissions that are taken from each exchange in the marketplace.
A word of caution is in order, however, because among these DeFi projects, many promise everything, with ROI that sometimes allow the stake to be multiplied by 10. As often, when new territories of innovation are discovered, it is "Far West", and the scams are numerous. This was the case in the early days of the web, for example. But these numerous scams must not hide the potential of the innovation in question, and the DeFi, once rid of its youthful crooks, will profoundly change investment and finance.
DeFi and aggregates
As mentioned above, "staking" is one of the possibilities that allow to lend crypto-currencies, being remunerated, and it is thus an investment in the universe of decentralized finance, as savings accounts would be in traditional finance.
If we go back to the monetary aggregates mentioned in the previous article, the DeFi therefore occupies the place of the M2 aggregate, which corresponds to investments such as ssavings accounts, etc.
DeFi exploits the possibilities of smart contracts for financial services; these smart contracts were introduced thanks to the development of the Ethereum blockchain, and they allow, simply put, to register a contract in the blockchain, and to make sure that it is executed automatically. For example, the insurance company AXA had developed an airplane delay insurance, which was connected to the arrival times of the various flights, and which could automatically compensate an insured person, without the latter having to take any steps. Intelligent contracts also exist for setting up loans, and they are contributing to the growth of DeFi.
Blockchain and financial services
Little by little, blockchain technology is therefore gaining ground and offering increasingly sophisticated financial services. These financial services can be mapped in the same way as monetary aggregates. Like the information technologies that appeared before it, blockchain technology, slowly but surely, is transforming interactions, and in particular, financial interactions. The financial sector, a pioneer of the blockchain, has understood this for several years, but despite this lucid anticipation, the tempo could very quickly accelerate...